The increase in the first three months of this year was encouraging but market demand and price began to shrink in April, the Federation of Indonesian Rubber Companies (Gapkindo) said here on Sunday.
Executive Secretary of the Federation Edy Irwansyah attributed the decline to falling price of oil in the world market.
The oil price fall and rising yen against the U.S. dollar, resulted in a shrinking price of oil-based synthetic rubber which in turn caused the decline in demand for natural rubber.
"Increase in the worlds production of natural rubber in the first quarter of 2017 might also have caused the decline in the price in the first month of the second quarter of 2017," Edy said.
Buyers who imported large quantity of rubber in the first three months of the year, chose to restrain from importing more waiting for the price to fall, he said.
The price of SIR20 fell to US$1.52 per.kg on the average in May from US$1.97 - US$2.2 per kg earlier.
"It is feared that the price would continue to shrink. If the price would continue to fall, the farmer could decide to change their crop again," he said.
Small farmers, who are found many in North Sumatra are the hardest hit by the commodity price.
Indonesia is the second largest producer and exporter of natural rubber after Thailand with Malaysia the third .
The three ASEAN countries dominated the worlds market of natural rubber and has form a cartel, the International Tripartite Rubber Council (ITRC). Vietnam , another ASEAN country, has indicated interest in joining the cartel.
The cartel, however, has not been effective in improving the market of natural rubber lately.(*)
Editor: Heru Purwanto
Copyright © ANTARA 2017
